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Conservation and Sustainability: The Role of the Private Sector

Speakers: Donna A. Harman, President and CEO, American Forest and Paper Association, Beth Keck, Senior Director of Sustainability, Wal-Mart, and David T. Perry, Corporate Vice President and Chief Global Business Development Officer, Northrop Grumman Corporation
Presider: Theodore Roosevelt IV, Managing Director and Chairman, Clean Tech Initiative, Barclays Capital
March 20, 2013
Council on Foreign Relations

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THEODORE ROOSEVELT IV: Good afternoon. We're going to begin the sixth panel. Now, I must compliment you all on being so good sitting through these long, long panels. This is the sixth one.

I'm Ted Roosevelt. And you've got here I think a very interesting panel because it's the first panel that shows the convergence, if you will, between the economy, national security and environmental sustainability, but it involves the private sector.

And -- so what I'd like to do is start off and ask each speaker to briefly describe how their association or their company looks through that particular lens and how -- to the extent they can, how they look through that lens differently at this convergence and why they are doing it.

So Donna, let me start off with you.

DONNA HARMAN: OK. Well, thank you for the chance to be here today. I really appreciate it.

From the forest products industry perspective, the American Forest and Paper Association, our members look at sustainability really through the -- through the lens of economic sustainability, environmental sustainability and social sustainability. Our companies have been in business, for many of them, 150 years, and they want to be in business for the next 150 years. And without a sustainable supply of raw material, that's impossible. So finding projects, finding opportunities that make sense from an environmental standpoint, from an economic standpoint and from a social standpoint is really what drives them to the table in the topic of -- that we're talking about this afternoon.

ROOSEVELT: Great. Beth?

BETH KECK: Yes, thank you very much, Ted, and it's a real pleasure to be here.

I come from Wal-Mart. And just to give you a little perspective about our organization, we operate retail operations in 27 countries; we have more than 10,000 retail units, more than $400 billion in sales and 2.1 million employees, which we call associates. And we really look at sustainability same as you: It's the combination of the intersection between the economic, the social and environmental as we do decision-making. And if you don't mind, I can just give a top-level story that kind of --

ROOSEVELT: Please do.

KECK: -- I think sets the tone for how we approach it.

So I don't know if Peter (sp) is still in the room, but he should remember these days the very beginning of sustainability at Wal-Mart. And it began with Peter (sp) being involved. And there was -- the very first I think real meeting was with: our chairman, which was Rob Walton; our CEO, Lee Scott; and our chief counsel, Tom Hyde. They were -- just imagine this little bitty conference room in Wal-Mart with no windows -- we're very much every day low cost on our operations. (Laughter.)

And then across the able of -- with them was this really young, energetic consultant named Gibb Ellison (sp) that Peter (sp) had introduced them to. And they -- you know, he gave his pitch. And at the end of that, our chief counsel said, well, I think maybe we should hire you, Gibb (sp), to map out our risk. And Gibb (sp) said, you know, that's going to be a waste of money, Mr. Hyde; you have risk everywhere.

And so as a result of that conversation, instead of mapping out our risk with, you know, what was going on in terms of our supply chain, natural resources -- I mean, we have, like, one of the biggest private fleets in the United States, we're the biggest energy users just here in the United States, and -- you know, and we sell a lot of stuff that requires natural resources.

So as a result of that, we just got on the journey and set out with three big goals that we're still working toward to get today. And one is to be 100 percent powered by renewable energy. The second is to basically generate zero waste through our operations. And then the third, which is even harder than the other two, is to sell products that sustain people in the planet. And that's how we are approaching sustainability.

Thanks.

DAVID PERRY: Fantastic. So I'm David Perry, and I'm from the industry that many would label as the defense industry, but I'd like to try to shift that away from that label because I think it misses an opportunity to find the real, elegant intersection between sustainable resources around the world and security.

We believe that companies such as ours, Northrop Grumman, but all the ones that do what we do, really are in the business of delivering security, not providing for the implements of war. And when you think of it that way, I think it -- you can quickly align yourself with the notion that to the extent that our mission is to deliver security through technology and advanced engineering, you can imagine that very quickly we can see a place at a table to try to help define and then refine technology and engineered solutions that can actually provide for security where there might be a deficit of resources or to anticipate human activity around the world that has a negative effect on the preservation of global resources. And I can give you many, many examples, and hopefully they'll come out during our discussion.

But I think if you would choose to see companies such as ours who are heavily vested in invention and innovation and the application of very advanced technology to something other than warfare but to a sustainable global enterprise, you can very quickly see how a partnership could form between great companies like Wal-Mart and companies that are typically labeled as defense companies but really could be in the -- in the business of helping sustain a global enterprise and see a marriage that is well-suited for conversation in a place like CI. So hopefully it'll come out in the conversation today.

ROOSEVELT: Good. Some of the earlier panels talked about a failure of policies, an inability of either within this nation or globally or at the multilateral level to carry out policies that are well-thought-out and coherent. To what extent do you think your association, your companies should become more involved to help us get the right kinds of policies that are going to be more effective to meet the goals that you've articulated so clearly? Who wants to take a crack at that for a start?

HARMAN: Well, I could start. I know forestry is a big issue and something that we look at globally. And certainly I think from our perspective, the -- our raw materials -- wood is our raw material to make our products that are sold in Wal-Mart stores or that carry the packages that are delivered in Wal-Mart stores. And so we're very much a part of that supply chain.

We set as an industry -- as opposed to a single company, we set industrywide goals. And one of those industrywide goals deals with forest certification, deals with procuring fiber that we know has been sustainably managed. It also deals with promoting policies -- public policies, government policies -- to prevent or stop illegal logging around the globe. And that's one of the things that I think AF&PA has been a leader, our members have been a leader, because it -- they see it in their economic best interest, they also see it as being good for the planet, and they see it in a developmental -- in a -- in a way -- in a way to help other economies develop around the globe.

And taking a natural resource, like timber, and converting it into useful products that help people in their everyday lives, that at the same time help create wealth for individuals and help raise living standards, is overall good for the topic, I think, of our panel discussion here, and that's the intersection of national security as well.

So with the action that the U.S. took with the Lacey Act, the amendments to the Lacey Act to require companies to do what Wal-Mart has been doing, which is asking questions of their suppliers, getting -- asking companies to do their due diligence, to know what's in their supply chain -- that's one of the first steps. And I think the U.S. showed some real leadership, and we've seen other countries around the globe follow that.

ROOSEVELT: Good. You mentioned the Lacey Act. How many people in the audience know who John Lacey was? (Laughter.) I assume you do, and if you don't, I'll tell you.

John Lacey was one of the earliest conservationists in the country. At one point, he was going across in a stagecoach and was held up by bandits. He was on his way to a place called Yellowstone. He was so impressed with Yellowstone that it was his leadership as Ohio representative that led to the first serious act that created a park in this country. The Lacey Act, which you referred to, now is a way in which we can trace an -- illegal wood that comes into this country, and we therefore have the ability to monitor it and help stop it.

HARMAN: Its -- I'm sorry.

ROOSEVELT: Go ahead.

HARMAN: Its primary goal was really not about wood.

ROOSEVELT: Yep.

HARMAN: Its primary goal was about plants and other sorts of natural resources. It was only in 2008 --

ROOSEVELT: And they amended it, right.

HARMAN: -- amended to cover wood.

KECK: On the side of policy, I think that it's very important to have very good policy environments. And I think when you look at renewable energy, that's a very good example in terms of our business. Right now we have about over 200 stores that have rooftop -- usually rooftop installations for renewable energy. This would be solar here in the United States.

But we've actually -- you know, because we have this commitment to get to 100 percent and we're only at 1 -- something like 1 billion kilowatt hours of renewable energy passing through our system today -- it's not quite enough by any means -- we've been going through an exercise looking at our operations around the world. And we have discovered as we've looked market by market -- retail market -- where we have operations that, in fact, one of the areas where we have to get more active is in the policy dialogue on renewable energy so that there's the right regulatory and incentive structures so that we can actually activate more of those types of projects.

China's a very good example. We have one installation. It took us four years to get it in place through one of the Chinese government's large incentive programs. We were the first foreign-invested company or retailer to have the opportunity to install those panels on a store in Shenzhen. But if it takes four years, it's going to take us a long time to get the other 3(00) or 400 stores covered with renewable energy there. So definitely there's an opportunity.

PERRY: Yeah, I think that for a security company, it would be really important for us to be involved in not just setting policy but trying to find an effective way to implement it and make it a sustainable policy. And I think most of the time when we look around the world at this subject, there is great interest and great -- almost religious fervor to see policies that help preserve global resources. But there's a very big challenge in trying to deliver the right solution to make it permanent and effective. And we would like to think that the investment that the U.S. and other countries have made, vast treasures in the development of really advanced technology, can be directly applied to solutions like this.

For instance, in forestry, it'd be nothing at all to decide that rather than looking for footprints in the sand, to just monitor or look at the Amazon or any other place that -- where illicit logging's happening, characterize where it's happening, how it's happening, to what extent it's damaging the environment and try to come up with solutions that help us get out in front of that and with objective evidence show the international community the damage being done and how to preserve it and do it in a sustainable way. That's very easily done if we -- if we find a way to bring this advanced technology and capability that's been put to other uses and apply it here.

In Wal-Mart's case, you can imagine this vast, global supply chain and that -- how it relies on certain natural resources. Let me use fish as an example. A lot of the fisheries around the world are so distant from any one nation they're very hard to monitor, and they're very, very susceptible to either poaching or other illicit activity, but yet it's very hard to enforce any type of policy that might already exist. But we could apply technologies to that, as we do in any number of other places in the world, to help detect activity, collect objective evidence about what is going on and then use that in an enforceable way to help ensure that the sustainability of those natural resources can be preserved for perpetuity rather than let it be illicit and very damaging.

ROOSEVELT: Do you want to talk briefly about the use of satellite technology as a way of doing that?

PERRY: Well, whether it's satellite-based or some other, there are means for detecting activity, infrared and other things, even video. Whatever the technology is, it exists today. There's no invention required. It's the application and delivery of that into the areas that are most environmentally sensitive in a way that is sustainable so that you can actually detect activity that is damaging.

Even if you wanted to trace back what ship is fishing in the wrong area at the wrong time and harming the environment, that's doable, but it's not a natural confluence of retail, you know, integrity of supply chain and what otherwise would be viewed as a defense article. But should we choose to, we could engage in a conversation in a forum like this and imagine the art of the possible in bringing those both intellectual activities and those right-minded preservation activities together with advanced technology and actually come up with solutions that are not developmental. They exist today, and they could be used to great effect to preserve natural resources.

And the big issue for me and, I think, for companies like ours is that anywhere in the world where there's a -- there is a mismatch between natural resources and population, that is a direct precursor -- (phone ringing) -- I'm sure that's not mine, but I'm not sure what it is. (Laughter.) It's some advanced technology. (Laughter.) But that is a real, measurable precursor to instability and a lack of security, any time there's a lack of sustainable resourcing. And we have -- not just Northrop Grumman, but all of these companies have capabilities to monitor and understand, become aware and then do proactive intervention to help preserve stability and security through mechanisms that would guarantee a better, more sustainable global resource pool.

HARMAN: If I could just say the great news is I think AF&PA and CI had a project that was along the lines of the aerial surveillance in Indonesia, I think back in 2005 or 2006, Justin, if I'm right. So it has been used and, I think, used very effectively. I think there were several instances in Indonesia where that was used effectively to stop illegal logging or at least to find out about it and get the appropriate authorities alerted and deal with it on the ground.

PERRY: Yeah, I think that it isn't a matter of figuring out the right technical solution. There is a much harder problem, is figuring out a sustainable business solution that allows you to deliver that technology in a way that becomes useful over a long period of time. That's by far the harder part of the problem but it's not really a technology --

ROOSEVELT: How do you -- how willing are your respective boards to make a long-term capital expenditure or investment in sustainability which will clearly have a payoff but near term might have an adverse impact on quarterly earnings?

PERRY: I'll take that.

KECK: I can take it, too.

PERRY: I mean, far be it from me -- just like the intelligence community does not make policy-influencing statements, I'm not speaking for our board. (Laughter.) Quote me on that, please. (Laughs.) But to the extent that our mission is to help deliver security around the world, then it's directly aligned with making the right kind of investment decisions that can provide for the type of technology solutions that help sustain global resources. So I think there's a direct connection and an obvious business case for it. And we make those kinds of decisions all day every day, about how best to invest. So I think there's a natural alignment there. But nothing happens without a good business case, so it would be up to us to work with other industry partners to find the compelling offering that causes a board of any, you know, repute to say that's a good idea, we need to do, that's the right thing.

ROOSEVELT: But the hard question which I'm asking is, will your boards make those hard decisions, make the trade-off for a greater good, longer term, and sacrifice a shorter, perhaps more ephemera benefit?

KECK: Well, let me -- I tell you, we see great RIs on our projects, so there's really no trade-off right now. So, for example, we took this goal that we would reduce our GHG footprint from our 2005 store footprint by 20 percent. And we were about two, 2 1/2 years into that goal and it was goal number 37 of all the public goals we had, you know, on a list, number 37. And we weren't performing against it, we were performing against 36, so the 37. And so a great colleague of mine, Charles Zimmerman, said, I'm not going to let us fail on that goal.

And so we got together a global team. We called them Project 37, for 37th goal. And we started looking at what was going on in our store footprint and why weren't we reducing those GHG numbers. And it turned out that we just needed to make a little bit more investment in refrigeration, in some maintenance and a few other areas that would actually get us on the right path. Lighting, for example. And so we started looking at, well, what's the ROI on these. And it turned -- (inaudible) -- rates, you know? So what was the problem?

So what happened internally is that we have quarterly real estate meetings, and so all of a sudden, instead of just bringing new store openings to the real estate meetings, we had on the agenda how you were doing against your -- actually with the remodel or renovations, and integrating in these energy-saving projects into the actual, you know, business process. And so by integrating it into the business process, getting the visibility, we've met the goal. And we're really proud of that.

ROOSEVELT: (Inaudible.)

HARMAN: I would just echo some of these comments that have been made. I don't think our board -- I don't -- our -- certainly the CEOs who serve on my board of directors don't see it as a trade-off. They see the benefit. They see the payoff. That's why they set goals. And the goals that they decided to set were around greenhouse gases, energy efficiency, water, safety, recycling, recovery rate for recycling, and all of those things have an economic benefit and an economic payoff. And I think that that's why we're really ahead of -- ahead of our goals, ahead of meeting the goals that we set, you know.

And it just -- they just don't think of it in those terms of -- is it -- is it a -- is it a trade-off between cost versus a long-term environmental benefit or good; it's intertwined, it's part of the decision, how does that capital investment, whatever that capital investment might be -- new equipment, new machinery is always more efficient than old equipment, old machinery. And it -- they get themselves on a capital replacement cycle. And sometimes they'll accelerate that because in fact, the payoff is greater.

ROOSEVELT: That's good.

Beth, you mentioned something about increasing energy efficiency. And as you look at the nation, we haven't done a very good job on energy efficiency. We keep referring to it as low-hanging fruit, but -- that's what (always seems ?) to happen, always low-hanging fruit, we can do a better job. And there are a whole bunch of obstacles there. What are the lessons that you think Wal-Mart could share with other companies that -- perhaps they can learn from you that could be used in other sectors so that industrialwide, and also in the CNI (ph) real estate sector, we could increase dramatically energy efficiency.

KECK: Oh, I think we have a lot to learn from our business in Mexico. I was just down there last month just kind of getting an update on some of the things that we are doing and working on some projects. And one of the most impressive things that we have is that actually, we have a team, that's the energy team, that is in charge of the energy P&L, so the profit and loss statement for energy for Wal-Mart Mexico. They also are in charge of the capital that is invested. And they bring some of the best (RRI ?) producing projects actually to, you know, forward to management in that market.

But what they've done that's really wonderful -- and we should be doing it everywhere -- is they've got metering in every store so you know exactly how much energy you're using. They produce a scorecard for that store manager. And so sometimes in big organizations like ours, you know, we have some central management of things. And when you get down to the local level, you lose the actual visibility for taking action.

So they have done very cleverly, have a scorecard that covers energy management, their plastic bag use, shopping bag use, water use because we have water shortages -- water is a big constraints for us in Mexico. And by -- and then they've structured it so that if you're doing better, the rewards for the savings are going onto the store profit and loss statement. So rather than taking credit centrally for, you know, making this great gain, they've created the incentive for the store manager to be more efficient. And I just feel like that's a great best practice for our company that we should be, you know, emulating in other parts of it.

ROOSEVELT: (Good story ?).

You have -- David, do you have anything you want to add?

PERRY: Well, we've had a similar focus on trying to reduce things like greenhouse gases. And we had quite a -- quite a bit of success early on, as many companies have, because it was so unattended, I think, for such a long time that we learned a lot, and we implemented a lot, and you saw this pretty dramatic reduction in the, you know, production of greenhouse gas activity.

But at the same time we're in a business environment which is causing the entire market to contract, so it's even harder to -- as you pull your footprint back, to continue those gains. But yet the focus and the education that's occurred over the last five, six years, anyway, has created, I'll say, a degree of pride and expertise at the same time that's caused our employees to feel personally wedded to the notion of a positive outcome, meeting those expectations. And those targets are tough.

And so just like Wal-Mart, we're continuing down that trends, even though it's -- there's less low-hanging fruit, and there's a smaller footprint which to deal with it. The same kind of lessons learned -- just simple things -- you know, making sure you actually make the capital investment to replace your windows in a 40-year-old factory or a hundred-year-old factory, replace the lights with LEDs and things like that, and you find out that it is a very dramatic improvement, not on the energy bill and everything, but the quality of life actually improves too because you have better lighting, better atmospherics, better HVAC performance, everything -- it feels better. The employee's proud of their contribution, and they're really just proud of being part of that kind of a solution.

ROOSEVELT: Now, your industry is going through an interesting phase, and you alluded to it now. For a variety of reasons, the footprint is shrinking. But I see you, your company and some of the others using your technological expertise to help develop renewable energy projects on a somewhat larger scale. They can either be new technologies involving turbines, underwater turbines and things of that sort.

To what extent do you see that as being a business that you want to try to develop in the future, and essentially -- not necessarily underwater turbines, but renewable energy and using the huge technological expertise that your company and others in the defense sector built up to diversify your business but also do something that we need to get done generally?

PERRY: Well, it goes back, at least to me, without going to any one specific technology, because I think it's a pretty vast array, but let me just say that -- again, going back to the notion that our -- we feel very committed to the mission of delivering security. To the extent that security is enabled or enhanced by providing either stability in clean water or food or energy, there -- it lends itself and directly contributes to a global security and sustainable environment.

And so we look at any number of natural -- naturally available sources of energy, whether it be the tide, the wind, the sun or anything else, trying to find ways to take advanced technology, apply it to those sources of energy and create sustainable and renewable sources to sustain, you know, beneficial activity, not just, you know, having a forward operating base in Afghanistan and not truck a bunch of gasoline over there. It's not just that. It's much broader than that, because, as you can imagine, that source of conflict in places like Africa and where there's, you know, very limited sources of fresh water and because of the dramatic swings in weather patterns that we've just heard about, they're contributing to significant droughts.

There's quite a connection between all of these. As droughts occur and are more persistent, those areas of the world, which have traditionally borne great harvest, now are very strained, which causes people to want to go fish more, because there's no other source of food; puts pressure on the supply chain there. In fact, if you -- if you do a little bit of reading, you'll find out that a lot of the piracy activity around the world is driven by farmers and those who made their life in and around the border areas and the sea fishing are unable to make that living anymore; they can't provide for their families, so they turn to the next best thing, which is the ship sailing by. And so we would rather deliver technology that causes them to feel safe and secure and no longer need to conduct piracy or anything else by finding renewable -- not just energy, but food and clean water as well.

ROOSEVELT: Great. Great answer. I'm going to open it up to the audience now for questions. There is a ground rule, which I want to make sure that everybody understands. You're to ask a question. (Laughter.) It's going to be short. (Laughter.) Indiana Jones happens to be in the audience today -- (laughter) -- and he will seize the microphone from you if you have something other than a short question. (Laughter.)

Yes, ma'am.

QUESTIONER: I'm Nancy Warzon (ph) with the Naval Postgraduate School, and I knew nothing about energy until my former boss Jim Woolsey, who went on to be the head of the CIA, but he was undersecretary of the Navy at the time, made a statement -- he was asked just before the '04 election, what would you do if you were elected next month? And he said, I would eliminate our dependence on Mideast oil.

I was asked a month later if I would bring some people together to start talking about energy, and it was a group at my house. None of us knew anything about energy, but we were self-learning. And the Hollywood script-writer in our group got -- spent some time with Rumsfeld just before Christmas at a party, talked to him for half an hour, and we got the line in the president's State of the Union in '06: The nation has a problem; we're addicted to oil.

I will tell you that at the Defense Department prior to that -- because I did live through the McCarthy era -- it felt just like the '50s, when you were terrified to say anything. I would go through the Pentagon and ask all these admirals and generals, will you put energy in the Quadrennial Defense Review, and I would just get deer in the headlights response.

But I had the fortune of creating this program and -- which was open to anybody who -- funded by defense -- who was opened to anybody who wanted to come listen, learn, connect, share and collaborate. I wanted to build a community. I wanted --

ROOSEVELT: Question?

QUESTIONER: I just -- I wanted to ask you -- because what I learned was what Wal-Mart did. They -- you had done amazing things with your lighting, and you were bringing in all your competitors to teach them about that. Are you continuing to do that?

KECK: Yes.

QUESTIONER: And would you do that also? (Laughter.)

PERRY: Sure. (Laughter.) This is not about my company or anything else, just about a more sustainable way, at least for me, anyway, to try to partner with our customer, which might be the U.S. government or any government around the world, again, to provide security. So sharing lessons learned and best practices is a natural act. We do it all the time with our -- what we would call our "competimates," you know, the Lockheed Martins and everyone. They're great people too. They're trying to do the same thing. Why not share and be better at it? So --

HARMAN: That's really one of the things that happens as a result of our sustainability program at our association. Every year we -- so we select or we ask for companies to enter into a kind of a competition where we look at the best of the best of the various sustainability projects, and then we provide leaders in sustainability awards to the companies. We had 25 or so projects last year. We made five awards. But that's another way of sharing those best practices, you know, including some new zero-waste ideas and other things that kind of get that competitive spirit going among the various -- the various industry players.

ROOSEVELT: Great. Yes, ma'am.

QUESTIONER: I warned you that -- the warning that if the question was too long, you were going to get Indiana -- that's an incentive for women -- (laughter) -- to ask a longer question. (Laughter.)

PERRY (?): You get 10 points. (Laughter, applause.)

QUESTIONER: (Inaudible) -- I'll always win.

PERRY (?): Very good.

QUESTIONER: Paula Stern.

MS. : Remember that. (Laughter.)

QUESTIONER: My -- thank you all very much. I am interested in not only food and water, et cetera, but waste. And I recognize -- and I hope we -- all of you all do, and I want to know how you're doing in your individual sectors or companies dealing with the whole issue of waste; the fact that we have landfills, which are filling up; the fact that incineration for -- with waste basically just adds to the CO2 problem.

I know Wal-Mart has experimented with a number of different things, and I've just become very focused on this simply because one of my clients is a waste to renewable energy startup. And I think that there are new technologies out there, but they're not really yet deployed but are -- I think are going to have to be, particularly in Afghanistan and other places where the military has to clear out every piece of waste, bring everything home under the law. So I'm just wondering what you -- your best technologies are.

HARMAN: You know, our best technologies are people. Because of the American public, we are now collecting well over 65 percent of all of the paper that's produced in the United States for recycling. It's done on a -- largely on a market-based system. The numbers are pretty incredible. Most people are shocked to learn that the number's that high. They think it's much, much lower. By weight, we collect more paper for recycling than all of the other commodities combined.

And it's -- and it's not because the paper industry put in place -- we have had goals since about 1990, but it's not because we put in place the programs; it's because we have communities, we have schools, we have businesses, we have households. We've done a lot of public opinion research on this issue, and the most encouraging and fascinating thing to me is the research among millennials. It's embedded, it's engrained in their lifestyle, and now they wouldn't think of not recycling where, you know, a generation or two before, it was -- we were working in the schools with education programs to help create recycling programs. Those parents now have children from that early education, you know, from 20, 30 years ago, and now we're seeing it really as a way of life.

And, you know, we don't know what the maximum recovery rate is for paper for recycling. We know there's some paper that can't be recovered for recycling. Toilet paper is -- (chuckles) -- you know, the best example. But nonetheless, I think we're making great strides. We have a goal of reaching 70 percent recovery by 2020, and I think we'll make it.

KECK: We're at 80 percent of waste delivered from landfill in our U.S. operations. It varies from that around the world, depending on where we're operating -- some places quite much lower levels. And for us, it was really a mindset transformation that came from setting that zero-waste goal back in 2005. 2005 for the most part, everything was going out of the back of the door, and we were paying for it to be hauled off. And today we have, you know, put in place, you know, different recycling streams, and we're basically have a -- you know, we're basically have a contribution of about $200 million a year. Depends upon, you know, how much the prices are and the recycling streams are. But essentially, we turned that waste from a cost into a revenue base for the company, so we have a very happy team.

QUESTIONER: But there is -- any new technologies?

KECK: Oh, you're talking about new technologies? We're using pretty basic things, from what I can see. We -- you know, back in the back of the stores, you have these big machines that basically compact the -- you know, we make these bales and they're -- you know, it's for multiple recycling. So, you know, you got plastic going in, you got cardboard -- you know, you have multiple streams. We have (sorting ?) going on in the back of the stores, you know, so we could probably use some more technology, and we always like that technology for efficiency in the stores.

PERRY: If you -- first of all, to be specific, I don't know that we have any grand new technology, but we certainly have implemented best practices that we've either come up with or mostly learned from someone else. But as an example, if you went into one of our factories -- the one I'm most familiar with makes the propulsion system for nuclear submarines -- every chip of metal that comes off one of the fabricated elements is collected and contained, categorized and actually shipped back to the foundry where it came from to be put into the next part coming in, so it's very efficient, or as efficient as it possibly can be. And there's great controls over every chemical and every paint and every substance that we use in any bit of our manufacturing process is highly controlled, both from a training of its use and its capture post-use for either recycling or proper disposal.

But as you can imagine, we use a lot of very sophisticated and advanced, both metals and materials, chemicals. Every one of them comes with a government-specified MSDS sheet that says, you know, use it in this fashion. We're very scripted in how we do that. And we believe -- and we try to be very religious about following all that with the proper training and protection for the people that use it. So I think it's -- you know, it's consistent with best practices in the industry.

ROOSEVELT: You know, and brief response to you, Paula (sp), there. Some of the things that we see in new technologies are ones where they get more than one revenue screen from the waste. So you get energy. You may get a tipping fee. Maybe you can sell soil because of what you're getting out of it. If you get more than one revenue stream, it -- the business base looks a little more robust than if you only get one revenue stream. And they -- these are the kinds of things that from a(n) investment perspective sound good.

Now, I think I'm going to call on men. I learned a lesson there, so -- (laughter) --

Back there.

QUESTIONER: Hi. Really insightful panel. Terrific job, thanks. Nigel Sutton from Raytheon. My question to you, Dave, is, in our sector, our customer or at least one of our biggest customers is DOD. And as we see the budget pressures going on, they did take valiant efforts to go green -- Green Hornet comes to mind, biofuels. Do you see as a threat, due to the budgetary issues, that that will go to the side? And point B, or part B of it is, how can we -- do you have any suggestions for our sector how we can collaborate and partner with them to solve their problem?

PERRY: That's a great question, and although I can't speak for the Pentagon on what decisions they might make, I think that question from Nigel from Raytheon to me, Dave from Northrop, is a great example of us actually being open and honest and just sharing ideas.

You know, Nigel, that I don't know what they're going to decide, but I would think it would be a right-minded decision to not only protect but embolden the type of investment for developing capability and technology with renewable energy sources, whether it's in the battlefield or here at home. And I suspect you'll find that they're very true to their word, and they're permanently committed to finding alternative sources of fuel, biofuel being one of them. And I hope that comes out to be true in this pretty tough environment that we're seeing right now.

And I can assure you that our company -- and I bet anything you're in the same boat -- we're both committed to helping the government find solutions so that they have more sustainable resources available to them, not only in a training mode, but in those unfortunate cases where we actually have to go project power somewhere. But I wouldn't want this to ever be -- this conversation to ever be associated with that type of activity, because that's really not what we're after. We're about preventing conflict and providing for security. And I know Raytheon's exactly the same way, Lockheed, everyone is doing the same thing. So I'm going to bet for the home team and we're going to do the right thing and stay committed to it.

ROOSEVELT: Great. Way in the back. You haven't -- lady -- you haven't asked a question before.

QUESTIONER: Thank you. My name is Jeannie Win with Voice of Vietnamese Americans. I would like to ask all three companies to come back to the private-public partnership. You have any plans for the Southeast Asia, especially Vietnam, right now an in the near future to work with the government there, and especially with the NGOs? How can you help the NGOs in that region to collaborate with you to bring in more awareness, and the people, help the people to help you and help the government in that area to conserve our resources, because it's very important. It truly is a matter of survival for the people there, with water and waste and many other things, especially forestry, because that also causes other problems, with flooding and drought and many problems.

HARMAN: I know -- just on the forestry front, I know -- I'm involved with the U.N. Food and Agriculture Organization in an Advisory Council on Sustainable Forestry, and our group meets a couple times a year. And Vietnam is definitely on the horizon as some wood products, in particular -- wood product facilities are beginning to spring up.

And there's a great economic story there. Of course, the industry needs to develop in the right way, but by developing in the right way, it will provide, you know, food, fuel, fiber, all of the things that are needed and necessary in Vietnam. And once people begin to make a living from the forest, then they have an economic incentive, they have a social incentive, they have a reason to be concerned about that environment and to make sure that the trees are replanted, that there's natural regeneration and that there's a future sustainable fiber supply.

And I think that that's the place where education help, whether it's through organizations like the U.N. or it's through organizations -- public-private partnerships, through various companies, member companies of ours who may have a business interest there. And I think its an area that we definitely have on our radar screen and are looking forward to working there.

KECK: So Vietnam from our perspective would be a source of product. And so the way that we would have influence would be through suppliers. We don't manufacture anything. And so we've started taking -- we've put in place a very systematic approach of working with suppliers in terms of their environmental or sustainability programs. In the early days, we operated on enthusiasm, which is quite typical with start-ups, the new idea. You know, you get -- use stories and you move things along. But we're now about seven years into this journey? Yeah, seven years, going on eight. And so we have really come to the realization that we have to keep -- make things very systematic and also get them very integrated into business processes for us to have really that long-term impact.

So this is what we're doing and how it would relate to Vietnam or Bangladesh or any other country where we don't have a retail presence abut we do source.

So we made a major investment in basically a way to understand the sustainability of a product category. So apparel or shoes is what we would call a category. And we did that with university partners -- the University of Arkansas, Arizona State University. And what that consortium is doing -- and it represents over a trillion dollars worth of revenue of consumer product companies today, Wal-Mart being one of the many members -- is that they have gone very deep and written what they call a dossier on a particular product, like apparel or coffee, which would be relevant to Vietnam as well.

And we, in retail business or any business, we have very short attention spans, and we said, oh, this is wonderful research; we'll never be able to read your report. And so they have produced what we call executive summaries. (Laughs.) And the executive summaries are very helpful because what they do is identify the key hot spots. So with coffee -- and if you have a lot of small and medium producers of coffee in a place like Vietnam, it should, as a social indicator -- you know, those reports, that are two pages long and that we will read, will, you know, bring out the major areas.

And then we said, well, you know, this has got to be made even more practical, and could you please turn this into key performance indicators? What that is is that's a set of questions that's based upon the hot spots that have come from the research.

And then Wal-Mart said, OK, we're going to take this industry product, and we're going to use it to keep our suppliers accountable. So we're transformed those KPIs that came through this collaborative process, which is (reiterated ?), so if you don't like the questions on the first batch, get involved going forward in the conversation. And we've put them into a very simple IT tool for, you know, basically a -- you know, so computer-generated questionnaire. And then we've trained over 150 of our merchants or buyers on how to use the tool.

So when the consortium produces these three pieces of research and the KPIs come out, we then take them, put them into a questionnaire, and we send them to our suppliers. And we've set it up so that in the back end, you can get ranked. And so today, we have now internal conversations going on in a very systematic manner with right now 30 percent of our supply chain, and we hope to have it at 70 percent of the volume by the end of this year.

And our buyers now have a very practical scorecard tool that they can use in their one-on-one discussions with suppliers in the -- they -- you know, you have -- what's the thing called -- a line review. You know, you get all of the glasses together, and you look at it and say, OK, I want this and this one. Or -- and we also have top-to-top discussions. You know, our top suppliers come in and see our CEOs or heads of business units at least once a year. And so now those scorecards are part of the conversation.

And so now a company that thought they were really hot and really good, you know, they kind of come in middle of the pack, some of them at the bottom, you know? And these are some of the kind of big brands, and they're really kind of concerned, and it's really great. (Laughter.)

And so this is a simple way -- it's quite complex on the back end of it -- to make it all work. And it's a brilliant piece of work, in my opinion, by some of my colleagues. But it -- what it does is it puts us in the position to influence that supplier that's going to Vietnam to buy from your communities.

ROOSEVELT: Great program. Anything --

PERRY: Yeah. You can imagine that the geometry of our contracting is quite, quite different than a big, massive retail operation where you might -- your billion dollars might come through a billion transactions. We might have one transaction for a billion dollars or something like that.

KECK: Lucky you. (Laughter.)

PERRY: If -- unless you don't get that transaction. (Laughter.)

KECK: That's a problem.

PERRY: And then it's a problem. (Laughter.) It's a different kettle of fish. (Laughter.)

But it -- but it does cause us to look at business partnership and alignment with countries such as Vietnam in probably a different way. And what it causes us to want to do and try to do is to develop enduring partnerships literally at the -- first at the education level and then at the supply chain level so that we can build partnership based on growing talent in their country that's aligned with their national security needs, not just warfare but national security. And I'll use cyber as an example. And we would also read out -- reach out to our industry competitors, like Raytheon and Lockheed and everything.

I'd call Nigel and say, hey, we need to go to Vietnam and build a partnership through the embassy or something like that and engage in the universities there, because they need to be able to protect themselves against cyberattack, as an example. And then we would go and build an education system within their existing university structure and grade schools, even, and teach them how to defend themselves, if you would, to provide for that kind of secure environment where it's safe for a Wal-Mart or someone else to go in and actually conduct business there; they know that the banking system is safe; they know that the transaction is reliable. And without that, the world is going to be a very dangerous place. And so we're interested in partnering with the countries around the world that are most likely to need that kind of security and stability so that the rest of the world can go on in the global commons and conduct global trade.

It's amazing. In my dad's formative years, he got his meat from the farm next door. He grew his own vegetables. He got his chickens from his own farm and went to schools around the corner and didn't know anyone outside of his town, never traveled out of the state until he was graduated from college. And my kids, two generations separate -- God knows where our fish comes from. You could probably tell me. (Laughter.) It's just such a global expansion it's hard to imagine the scale of complexity. And so partnership, both in education and in trying to provide for that coordinated supply chain, is mind-boggling complex, and it does require a global partnership. So we would look for those kind of education partnerships first that then teach us or help us identify the right sources of talent and capability within that country and build that global web of security. It's how we'd come at the same thing.

ROOSEVELT: Very interesting.

Good. Adam.

QUESTIONER: Thanks very much. Adam Wolfensohn. A question for Beth. I think 10 years ago no one outside of Wal-Mart or CI would have imagined that you guys would drill down into your supply chain to, you know, create such positive chain as you have -- change as you had. Now looking at that third goal, which I'll paraphrase, about, you know, truly sustainable products and your role in a truly sustainable economy -- you said yourself that's the most difficult, I'm sure you're not going to shy away from it -- what is the -- give us a preview of how you're going to grapple with that most challenging of questions of how Wal-Mart fits within that.

KECK: So that's the products that we sell.

QUESTIONER: Products that you sell, which -- and it's been interpreted, certainly, but the outside is, how do we fit into this broader sustainable economy?

KECK: OK. Sure.

Well, 10 years ago we wouldn't have expected this of our company either. (Laughter.) We've gone through a massive transformation in terms of our engagement with the world. And I think it's been very instructive for our company and very, very healthy.

I joined the company about 8 1/2 years ago. At that point in time we were in the throes of reputation issues and very insulated in Bentonville. And Peter (sp), you made some of the early trips there, and you know how insulated we were. And it's been a -- truly, we've used sustainability to lead the transformation and lead, you know, engagement with the world on the -- on the bigger issues.

So in terms of, you know, where we are engaged from a -- from a -- you know, our slogan or our vision is to save people money so they can live better. So the live better side of the house, which I'm part of as sustainability, also includes women's economic empowerment. If you look at the trends, you know, in society today, around the world, our number one -- you know, who's the shoppers in our store? It's women. And you look in, you know, particularly in developing countries and in -- I work a lot on the farming sector. And there's a need for, you know, truly engagement there to -- for women to really have the opportunity for the actualization of what they can contribute to society. So we're very engaged there.

Another area that's very complimentary with sustainability is hunger. And we're one of the largest donors to -- for food banks here in this country. Totally complementary with reducing waste because instead of throwing away the food, we would catch it earlier and get it diverted to food banks. And so today, you know, in society, when you've had -- we've had, you know, economic difficulties, we've been able to make sure that the food that we have from our stores is going to people who can't afford to shop in our stores.

We also focus in on diversity is another key area as well.

And so those are, you know, some of the big headline initiatives. (Hope ?) that's what you were looking for.

ROOSEVELT: Way in the back.

QUESTIONER: Thank you. Jonathan Chan (sp). This is my name. Some -- this is for Ms. Keck -- some would argue that the business model for big-box retailing is inherently against sustainability in the sense that your physical footprint is so large -- I don't mean Wal-Mart in particular but the industry as a whole. And how do you look at building out instead of building up and building parking lots instead of garages?

KECK: Building out, building up. So you're -- let me think about that for a second. So essentially, the question is, is that because we sell a lot of stuff and we have big stores, it's counterintuitive we're sustainability. And essentially, we have a business model that's built upon efficiency. And so actually, we think it's very intuitive -- we would take the -- we would be counter for -- we would say that that -- what you've said is counter to our actual DNA. And the way we approach the whole sustainability conversation inside the company is to actually actualize on this and get more efficiency.

Good concrete example? You know, I can't take away the fact that we sell a lot of different things in our stores. You know, our customers like those things. But I can work with my colleagues who are merchants and encourage them to reduce packaging and reduce the actual footprint through packaging. There are so many virtuous things that happen when you can shrink the package. Our team in Brazil, J&J, one of their global production sites for Band-Aids that you buy here in the U.S. is in Brazil.

So our team went through a(n) end-to-end project with J&J in Brazil and convinced them to reduce the size of the Band-Aids box. Well, those Band-Aids then get on containers that are shipped all over the world. So it reduced the number of containers. It then reduced the number of containers. It then reduced the number of cases from those facilities that we were actually, you know, trucking to our stores. And then, you know, it actually gave us a little sliver more of shelf space that we could use to display something else if we so desired.

So, counter to -- it's counter-intuitive, but if you can just take --you know, if you can take sustainability and slice it up piece by piece, it creates many, many efficiencies and that's, you know, really why it's been sustained in our company for these eight years. It's not a CSR project, it's a business proposition for us.

And just to give you a statistic on fleet efficiency that has come in part through reduced packaging as one of the key strategies, you know, we took an '05 baseline from the original goals, and last year we were at 69 or 70 percent had improved fleet efficiency of 70 percent over our '05 baseline. We're going to improve it another 10 percent, you know, in the coming year when we report. And just to give you a concrete -- it's 297 million more cases that we can actually put into the same trucks because of improved efficiencies that we've invested in. And at the same time we drove 11 million less miles just by, you know, focusing in on the back-end logistics and saved ourselves $130 million.

So that's how the equation works, is a pairing of activities that gives you a real good business return.

HARMAN: If I could just add on that, because our members are in the packaging business. And our members, in fact, work with your --

MR. : (Off mic.)

HARMAN: Well, this is the supply chain. This is how the supply chain is worked. Through efficient packaging, making our paper-based packaging more efficient, you end up with less waste in your products. Fewer things break. The package design, whether it's in, you know, packaging glass bottles with cardboard or with corrugated, we can do that now much, much more efficiently, in part because of Wal-Mart's pressure on its customers, who are in turn my member company customers who work in partnership to find lighter-weight packing, to find smaller packaging, and to make sure that the packaging that is delivering the product is in the end resulting in safe packaging or safe delivery of the product so that you have less spoilage and less waste, back to your point.

ROOSEVELT: Great. Stewart.

QUESTIONER: Thanks. Stewart Patrick, CFR. I just wonder if you would speculate, look out sort of 10 or 20 years and consider the coming revolution that people are talking about in 3D printing and what the ramifications of that are going to be, because it will totally -- you would think that it would totally disrupt global supply chains. It would reduce waste incredibly because you wouldn't have -- you know, if you were printing a car, say, for instance, you would be able to do it in a way where you don't have excess -- it's not like you -- you know, you have the sheet of metal and you sort of cut out different parts of it. You actually are only using what you need.

Do you have any sense as to whether or not this is going to have any impact on -- you can also produce the stuff anywhere, as well. So global supply chains are going to be quite different if this takes off like people are talking about.

HARMAN: We actually already see it today with print on demand, with books that are printed on demand, other products that are printed on demand rather than being printed in, you know, a remote location and trucked or brought somewhere else. You know, we're actually seeing an early phase of that.

I obviously can't comment much on the 3D printing with regard to producing a car, but certainly you can see where the local -- the local -- eliminating part of that distribution -- as part of the distribution part, you'll still have distribution of the sheet of metal that goes through the printer, and I don't think we'll all have one of those printers in our homes. (Laughs.) But the print on demand is a good example of that happening today.

ROOSEVELT: Well, way back in the corner, man with the glasses.

QUESTIONER: Yeah, I have a -- one question. We have -- there's no doubt that there -- that sustainability and efficiency are incredibly important --

KECK: Who are you, by the way?

QUESTIONER: Richard Matthews (sp) from the University of California.

KECK: Thank you.

QUESTIONER: Sorry about that. And greening the supply chain is one side of it. The other side is, you know, there seems to be, I think, a bit of a disconnect between some of our most -- our best products in terms of efficiency and the sustainability and the life cycle of consumers.

So young people starting up often aren't able to buy the most -- the best cars, the best appliances, the best windows and floor coverings and furniture from the perspective of efficiency and sustainability. So I'm wondering, could the -- could the private sector play a role in designing some sort of green startup package so that the next generation of Americans could get started on the right footing rather than having to wait until they reach middle age to move into that -- into that domain? (Laughter.)

PERRY: I got this really cheap satellite I'll sell -- (inaudible). (Laughter.)

KECK: (Inaudible.)

PERRY: See me afterwards. Yeah.

KECK: We like using satellites. They help us in Brazil.

PERRY: Yeah, they do.

HARMAN: See, I guess I would just to respond to that with -- back with the millennial consumer research that we've done, where what we find among millennials is that they are very concerned about the environment, they're concerned about the future, and they're -- and they make -- they make very thoughtful and methodical decisions, which is maybe counterintuitive.

So I'm not so sure that millennials and younger people are necessarily going to consume what their parents consumed, just based on the -- just based on the research that -- you know, that we've seen. They're making smart economic and environmental decisions.

KECK: It's our vision to be the green startup package. Basically, we want to integrate into the specifications of the products that we buy sustainable characteristics, which is the whole concept behind this KPI exercise and index exercise I explained earlier. And it's really from a very simple philosophical viewpoint. You know, basically we feel like our customers should never have to choose between a product they can afford and one that's good for them and for the planet. It's that simple.

ROOSEVELT: Good.

QUESTIONER: All right, Roger Parkins (sp). This is a simple question, and it may not be one that you can answer. But you are a large trade association and very large companies and, from what I'm hearing, very admirable efforts on this part.

In terms of the whole, let's say, U.S. economy, there are a lot of large companies and middle companies and small companies. Do you have any sense of what percentage of the total products, whether they come from a small or large, are coming from companies that are addressing this like you are? Are you atypical, or are you typical? I mean, are -- as -- are -- what -- are the kind of companies that are doing what you're doing taking care of 50 percent of all the products, whether they are consumer products or government products, or we at 90 percent, or are -- you sort of represent 10 percent of the products, and we have a lot -- a long way to go? Do you have any sense about that?

HARMAN: Well, I can tell you in our association, we represent about 85 percent of the production capacity in the industry. We have some very, very small companies and, in fact, one of those small companies actually won one of our sustainability awards that I mentioned earlier for energy efficiency. They reduced their -- they improved their energy efficiency by, you know, making some process changes within their -- within their mill.

So I can tell you that some small companies are, in fact, attuned to sustainability, at least from my experience. But what it is in the overall economy, I haven't looked at that. It's an interesting question, though. I can just tell you from our experience that we have both -- we have all sizes of companies that are -- that are focused on it.

QUESTIONER: For example, your trade association is -- and your group of industries -- paper is working on this, right? The question is, there's a lot of other associations for different other industries, and are they all on board, or are you sort of the lone ranger on this? That's what, I guess, I'm asking.

HARMAN: I'm not aware of any other associations that have the quantifiable, verifiable set of goals that our industry has set. I know a number of other associations have their own sustainability initiatives, but they would be different. They would be specific to -- you know, to their -- to their industry.

I think the electrical manufacturers -- that's an industry that I actually did some -- I spoke with them and helped them as they were thinking about how they would put together their sustainability initiative. I know the grocery manufacturers have a big initiative related to food waste.

So I think that there are a number of industries that are focused on it. I think we're all maybe approaching it in a slightly different way, though.

KECK: It's my perspective that it's a huge movement, no matter what company size. You know, we deal with companies in many different areas, and the industry associations that we intersect with -- they all have people who are doing sustainability as part of the industry association, which tells you something. They're all at different stages of maturity, I would say. Dairy industry got on board very early and has also, you know, very quantifiable time constraint, you know, timebound commitments, as an example.

And we're seeing it in really all sizes of companies as well, and also large uptake in a country like Mexico -- very interesting. You'll see that. We also see fairly large uptake in Brazil, where they're actually living the conversion of the Amazon.

ROOSEVELT: (Inaudible.)

PERRY: Yeah, I don't think that aerospace is any different from a(n) ethos point of view. I think there's a very deep commitment to want to do the right thing and try to find the best practice and implement it. And so it feels consistent -- although I don't want to speak for all industry associations, it feels like --

QUESTIONER: You're not speaking for anybody today, right? (Laughter.)

QUESTIONER: (Off mic.)

PERRY: Nope.

QUESTIONER: No, I'm joking. (Not the government. That's ?) --

(Laughter.)

PERRY: I (can/can't ?). (Laughter.) But it feels like there's been a transition probably in the last 10 years, where it went from one of either ambivalence or lack of understanding or appreciation for the benefit to one where now there's a personal ownership and even a pride in being part of that kind of activity within your company or your industry. I think that's pretty pervasive. When I see it, it feels like it's very well -- there's an ownership.

HARMAN: Well, we started in -- we started in 1990 with specific, you know, goal-setting and the like. So it's been quite a while.

ROOSEVELT: Go ahead, Lori.

QUESTIONER: Thank you. (Audio break.)

ROOSEVELT: I tell you what. Get up and I'll repeat the question.

QUESTIONER: I'd just like to build on the last question. I'm Lori Murray, U.S. Naval Academy. And first, thank you for a really fascinating panel discussion.

In terms of the motivations and the impetus to do the types of changes that your companies have undertaken, I was wondering if you could assess for us the most important influences on you, how much of that is global, either global governance institutions or foreign countries you're working with that have imposed requirements; how much of it is U.S. government has imposed requirements; how much of it is public opinions, millennials and nonprofit organizations. If you could just assess in 2005, 1990s, you know, where Northrop really started paying attention, was it contracts with the U.S. government that included this in it or, you know, just what provided the most important impetus and how you would prioritize that, in order for us to assess what's working best in terms of making changes.

PERRY: Yeah, I don't know what came first, the chicken or the egg. But I can definitely tell you that my kids actually had a big influence on me, and then I think everyone else is the same way. They come with a very different perspective than we might have had in our early years.

But we've -- at the corporate level, we feel just a personal obligation to find ways to be both more efficient, to create more shareholder value, but also to do things in a way that aren't harmful for the next generation. And I'm not trying to sound corny, but I think just -- I think everybody probably has felt that transformation over the last 20 years, in this country, anyway, as we become more educated, more aware, maybe a little less omnipotent. You know, we're not doing everything unilaterally anymore. And from that, I think, it begets a higher sensitivity and awareness to try to do things in a more sustainable way.

And our motivation isn't driven by some government contractual compliance issue. It's really driven by desire to be a good business partner around the world and try to create the sustainable business that isn't harmful to the environment.

And that's not a very traditional approach. If you look at the last hundred years of those who have undertaken activities like we've undertaken, building very advanced capability, in many cases they were insensitive to the damage they were doing to the environment. Many companies like ours are sitting on top of spoiled lands from activity from a hundred years ago. And so we're quite sensitive to it and determined not to repeat those sins of history.

KECK: So you're asking about motivation? It was Katrina. If you remember Hurricane Katrina and the problems with getting disaster relief to New Orleans, our company really excelled during that time. And it was out of that that Lee Scott said, I need a new vision for my company as the CEO. And working then, of course, with some key thought leaders, he said, OK; he put us on this course and set out these three goals that we're still working on.

HARMAN: I would just offer that I think a lot of it is in fact economic, and it's where we started. The projects and the opportunities that, as we -- as companies have started really looking at what can be accomplished and what can be achieved, they find that there's an economic payoff to good sustainability projects. And it has become, then, a way of doing business.

And to your point, it's become much, much more engrained. I don't think it's government policies and government programs that are -- that are the driver. Most of the times, at least in our -- in our experience, the industry's already far beyond what some future government mandate might look like. They've already taken those actions; they've figured out how to do what needs to be done. And frequently, the government is catching up with where the private sector is.

I think the role of NGOs and of groups in society have been helpful from an education standpoint, an awareness standpoint. And I guess that's why we're talking about sustainability, because when you put it together, it's really all three of those, and you find -- I think of it as that -- you know, that Venn diagram, and sustainability is a piece in the middle where you have the three overlapping circles. And that's certainly really helped us think about it as the -- as the forest products industry.

ROOSEVELT: Great. We probably have time for two more questions, so can I -- those of you who've got great questions, raise your hand. (Laughter.) Those that have -- OK. Lady there, and we'll get one -- yeah, go ahead.

QUESTIONER: Thank you. I'm Jill Sigal with Conservation International. Dave, a minute ago you stated that Northrop Grumman's mission is to deliver security around the world and that there is a direct connection between sustainability and security. Would you and Beth and Donna give us a few more examples of that direct connection between sustainability and not only national security but also economic security?

PERRY: Sure. There are so many examples I'd hate to just pick one, but I'll do it anyway. Imagine, if you will -- not imagine, just be aware of the fact that there are large ocean areas where most of the fish populations of the world are produced. They spawn, and they grow there, and they become vibrant or not. But those large, protected ocean areas are far distant from any one nation and thus very difficult to protect or to -- even to be aware of activity that might be contrary to the sustainment of fish populations. And also, if you connect the dots, you realize that many nations around the world are heavily dependent on protein sources that come from the sea.

So to the extent that there is an inability to actually characterize and monitor the activity that might have a negative effect on the long-term sustainability of protein sources from the sea, it then injects instability and potential lack of security in many, many countries around the world that find that dependency. And as you heard, the population in the world is going from 6 to 7 billion to 9 or 10 (billion). That problem will only get worse to the extent that it -- you reach a point where it's a tipping point, and countries or populations of people feel compelled to rise in anger or in conflict because they can't provide for their family.

That is a -- we feel obligated to try to apply technology to that, to find a way to preserve stability not just for that country or that region of the world but because we are now a global economy, and if you follow the global trade, it all -- basically we're all one economy now. That has a direct and compelling negative effect not only on our economy but our national security.

And so we find ourselves deeply wedded to the notion of trying to get out in front of those kind of problems, understand how to detect and characterize that kind of activity and help inform the world about it so that we can reverse those trends and make things like fish populations more sustainable so Wal-Mart can get those fish and sell them and know that they're coming from a good source. I mean, maybe just one of many, many examples.

Another one would be the use of very, very advanced, big data manipulation or characterization to figure out where disease is happening before big plays and big outbreaks of virulence occur in various regions of the world. And through very simple means, we could advance the state of detection and proactive containment of disease around the world through the very same applications of technology that are currently used in the intelligence community.

Just two examples, but there's many, many more beyond that. And I hope forums like this would be the place to try to propagate the kind of discussion that brings them to light.

KECK: I mean, for us it's very much part of the long-term viability of our company, because essentially, if we're not part of the conversations and the solutions today, we won't have products like seafood on our shelves. And that was really a big realization -- you know, 2008, we've talked -- several people mentioned today about the food shortages and such. We experienced that first-hand in our Mexico operations. When there was a shortage of corn and not enough tortillas, we had big problems in Mexico that year.

And that was part of what helped us start thinking more about our grocery or food business. I talked about those 37 goals. Well, 36 of them dealt with our operations, except for one on seafood. So we took our first seafood commitment for sustainable seafood in '06, but we really hadn't dealt with the other half of the retail box, so to speak, you know, which was our food footprint.

So in 2009 we went through a very thoughtful process to set forth our sustainable agriculture strategy. And we learned a lot from it. It was just really thinking about this intersection between global population, this wonderful rising middle class, because we love the middle class because they'll shop at our stores, but also then food security and having food for ourself on our shelves. And so that was really the impetus behind our commitment to, you know, buy million dollars of food from small and medium farmers, understanding that there needs to be about a 40 percent increase in productivity from small farmers, small holders, in order to help meet the impending food needs around the world.

And so we need to be part of that conversation. We need to have our supply chain organized so that we're not just taking -- buying food from large commercial operations, but that we're working with aggregators and others and organizing our supply chains so we can get those small farmers into it and they can have the support they need to get ready for market and to be able to be really getting the prosperity that comes when you can get into the more organized supply chains. So we're thinking about this a lot.

HARMAN: I guess I would just offer, you know, the wise and sustainable deployment of resources is what helps create economic growth and what creates a better standard of living. And to me, a better standard of living, more literacy, more education, all of those things lead to more political stability and peace around the world. So as we look at -- as we look at our interest, certainly, from -- we're part of the global economy. Our companies are global competitors. We export product around the globe Trade is a very, very important part of our business.

And seeing those things all come together -- as I said when I started, some of our companies have been in business for 150 years and they want to be in business for the next 150 years. So, really, the sustainable supply chain and our part -- we're sort of on the foundation side -- (chuckles) -- of the sustainable supply chain. We're at the beginning, and whereas you're a little further down that chain. And our companies think that, you know, it's really worth making the investment for their future. And certainly when we have more political stability, it's good for all of us.

ROOSEVELT: Good.

Well, on behalf of the panel, may I thank you, the audience, for asking such good questions -- (applause) -- and thank the panel for doing such a great job. (Applause.)


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